MAS has entered into a sale and purchase agreement to acquire from MD CE Holdings Limited and Atrium Turkey Samsun B.V through a subsidiary of PKM Investments S.á.r.l. This move is in line with the group’s strategy of investing across the broader European market.
Being two wholly-owned subsidiaries of Atrium European Real Estate Limited, the entire issued share capital of a special purpose vehicle that owns the retail centre known as Militari Shopping Centre, located in Bucharest, Romania.
The EUR 95.0 million acquisition is to be settled in cash and payable upon fulfilment of certain conditions precedent to the SPA.
Militari is located west of Bucharest’s city centre and it has benefited from extensive residential densification in its immediate surroundings since its opening in 2009 and benefits from an aggregate catchment of approximately 294,000 people within a 45 minute drive.
Current residential schemes under development will add a further 4,000 apartments in the immediate vicinity, with scope for significant continued development in the area. This is expected to lead to strong growth in footfall.
Militari has 53 tenants spread across 56,416 square metres of gross lettable area, of which 53,666 square metres relates to retail and 2,750 square metres to office space, in addition to 2,500 parking spaces. The annual net operating income of Militari is EUR7.1 million at a weighted average rental of EUR10.6 per square metre per month. Militari was opened in 2009 and is anchored by Auchan (hypermarket), Praktiker (DIY), Decathlon (sports goods) and various international fashion brands such as H&M, C&A, Reserved, New Yorker, LC Waikiki, Pepco, Deichmann, Hervis, Humanic, Koton, Takko and many others. The current tenant mix has a weighted average lease term of five years from April 2018 and the site is fully occupied. Food and grocery tenants contribute 26%, while fashion and lifestyle tenants contribute 49% of passing rent.
The asset provides stable underlying income over the medium term with good prospects for future growth that will drive MAS’ direct investment return. It is expected that lease extensions and some capital expenditure will enhance income levels. The prospect of new competition is low with nearby residential developments contributing to drive growth in footfall. There is capacity to significantly extend and/or re-develop the centre as demand grows in the medium term and beyond.
The purchase price of the shares reflects the fair value attributed to Militari as determined by the directors of MAS. The directors of MAS are not independent or registered as professional valuers or professional associate valuers in terms of the South African Property Valuers Profession Act 2000 or otherwise. The net operating income detailed above approximates the net profits attributable to the acquisition.
The acquisition is subject to conditions precedent that are standard for a transaction of this nature, as well as the obtaining of certain permits from the relevant local authorities in Bucharest. Completion of the acquisition is expected to take place within the next three months.
The acquisition has been undertaken in terms of a long-term co-investment agreement that MAS has entered into with Prime Kapital Limited. MAS’ effective economic interest in the acquisition is the equivalent of an 80% direct participation in the performance of Militari and a 20% participation at the weighted average cost of external funding achieved by the joint venture with Prime Kapital, in line with the previously announced co-investment agreement. Prime Kapital has sourced and will manage this acquisition under the co-investment agreement.
A number of further investment opportunities are presently being actively pursued and the market will be further updated as those discussions are concluded.
The acquisition is categorised as a Category 2 transaction in terms of the JSE Listings Requirements and as such is not subject to shareholder approval.
Morné Wilken, Chief Executive Officer, commented:
“We are very pleased with the acquisition of the Militari shopping centre in Bucharest, the capital city of Romania. This centre enhances our current income-generating portfolio and supports our strategic focus of delivering high quality and growing distributions on a sustainable basis over time. The transaction is testimony of our disciplined investment approach to make sustainable long-term investments.
“The centre is well positioned and provides stable underlying income. We believe we can unlock value through active asset management and some capital expenditure to enhance income levels. As a number of current and future residential developments are completed in close proximity to the centre, we expect demand to grow, allowing for a significant extension or redevelopment of the centre to further drive growth in income.”